IT IS A TIME of trial for organized labor. Only 13 percent of nonagricultural workers are unionized. The figure is even lower among immigrants who toil at unskilled jobs in the nation's newest industries. Employers have abandoned the paternalistic job security measures, pensions and fringe benefits of which they boasted only a few years ago. Instead, they are imposing wage cuts and speedups on their workers while the American Federation of Labor stands by helplessly.

Sound familiar? This was the labor movement's plight in 1935. Like many Americans today, people back then believed that labor unions had become weak and irrelevant. In 1932, George Barnett, president of the American Economics Association, declared, "American trade unionism is slowly being limited in influence by changes which destroy the basis on which it is erected." Yet a few years later, the Congress of Industrial Organizations, an insurgent group within organized labor born out of a debate that few outsiders bothered to follow, set off America's greatest surge of unionism. That growth continued, peaking at 35 percent of the workforce just before the two rival labor federations reunited in 1955, forming today's A.F.L.-C.I.O.

Now the unionization rate has sunk to about 8 percentof all private-sector non-farm workers. Globalization and the service economy have displaced the mass production industries that produced the last great internal union upheaval 70 years ago. Those industries, and the New Deal legal and political order that the C.I.O. helped shape, have been weakened beyond recognition.

Next month, at the A.F.L.-C.I.O. annual convention in Chicago, a sharpening dispute over how labor should meet these challenges will reach a turning point. A dissident group led by Andy Stern, who heads the 1.8 million-member Service Employees International Union (the A.F.L.-C.I.O.'s largest affiliate), is trying to oust John Sweeney, the federation's president, and engineer a major shift in organized labor's strategy. Outspoken and impatient, Mr. Stern has angered his colleagues in union circles by threatening to pull his union out of the A.F.L.-C.I.O. if his reform program is not adopted. But for all his abrasiveness, his program offers labor's best hope - maybe its only hope - for revitalization.

Mr. Stern's Change to Win program calls for a one-union-per-industry model that would curb competition among unions and increase the organizing capacity of those that remain. Changing job descriptions have rendered many traditional union jurisdictions obsolete, so that unions often end up competing against one another for members. Merging industry unions would also make it harder for employers to play off one union against another.

Consider the airline industry: at least five unions represent pilots, three represent flight attendants and six represent ground crews and ticket agents. This balkanization has made it harder for unions to fight assaults on their livelihood by companies like United Airlines, which recently shed its pension obligations, opening the door for other airlines to threaten their workers with the same fate. Today, federal, state and local government employees are scattered among 13 unions, and health care workers among more than 30.

The proposed consolidation of the A.F.L.-C.I.O.'s 58 affiliates threatens many vested interests, not least those of the officials who head smaller unions. But a handful of the largest unions - the Teamsters, Laborers, Unite Here and United Food and Commercial Workers - have embraced Mr. Stern's reform agenda. These unions make up 40 percent of the A.F.L.-C.I.O.'s membership, and may join the service employees union in bolting from the federation if they lose their bid to transform it.

The insurgents have also called for spending $60 million - about half the federation's budget - on organizing, versus the $22.5 million that Mr. Sweeney has offered. They argue that if labor is going to survive, its most urgent priority must be increasing the percentage of unionized Americans. But only a few A.F.L.-C.I.O. unions - most of them Mr. Stern's allies - have put more money and effort into organizing.

Ten years ago, Mr. Sweeney - who was Mr. Stern's predecessor as the service employees union president and his onetime mentor - was elected to the A.F.L.-C.I.O. presidency on a platform of "organizing the unorganized." But because he presides over a federation of unions whose current structure does not allow him to enforce his will, Mr. Sweeney has been unable to reverse the tide of union decline. That's why another key plank in the Change to Win platform is to strengthen the power of the central federation itself.

The service employees union's track record is the best case for taking its proposal seriously: it has tripled in size over the past quarter-century, as membership in most other unions plunged. It is on the front lines of the nation's service-based economy, the leading edge of the race to the bottom that threatens to drag down labor standards for the rest of us. And with an eye on globalization's impact, its building service division has formed alliances with unions overseas to advance its organizing in the United States, where janitors and security guards are often employed by foreign-owned companies that offer workers in their home countries better pay and working conditions.

With unions in decline, real wages for hourly workers are stagnant, their health and pension benefits are in tatters, and inequalities between rich and poor have widened to levels not seen since the 1920's and early 1930's - just before the last great union surge. Given a chance, Mr. Stern's proposals can restore labor as the counterforce it once was in an era that saw remarkable gains in prosperity for all Americans.

Ruth Milkman, a sociologist, is director of U.C.L.A.'s Institute of Industrial Relations and a visiting scholar at the Russell Sage Foundation.